When a Compensating Control Exists, the Absence of a Key

question 30

Multiple Choice

When a compensating control exists, the absence of a key control

• A) is no longer a concern because there is no longer a significant deficiency or material weakness.
• B) is still a major concern to the auditor.
• C) could cause a material loss, so it must be tested using substantive procedures.
• D) is magnified and must be removed from the sampling process and examined in its entirety.

---

Definitions:

Budget Line

A graphical representation of all possible combinations of two goods that an individual can afford given their income and the prices of the goods.

Indifference Curve

A graph that shows different combinations of two goods or services among which a consumer is indifferent, illustrating preferences and trade-offs.

Total Utility

The total satisfaction received from consuming a certain amount of goods or services.

Marginal Rate of Substitution

The rate at which a consumer is willing to give up one good in exchange for another good, while keeping overall utility constant.